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Rates Rise Again. No Housing Threat Yet

Fixed mortgage rates have been on a steady ascent since bond yields blasted off in May. Now, the major banks are jacking up rates again.


Most of the Big 6 are lifting their “Special offer” 5-year fixed mortgages to 3.79% or 3.89%, a 20 basis point hike.

From that, typical well-qualified borrowers can expect at least 20 bps “discretion” (i.e., actual rates of 3.59% to 3.69%). If you know how to haggle, you might do even better.


Royal Bank also announced a 20 bps hike in its 5-year posted rate, which rises to 5.34% on Thursday. If a few more banks follow RBC’s lead, the benchmark qualifying rate will rise accordingly. That would mark the first increase in the benchmark rate in more than 500 days (since April 2012).

A higher benchmark rate makes it tougher to qualify for a variable, HELOC or 1- to 4-year fixed term. (Mind you, one 20 bps hike is not as impactful as dramatized headlines like this suggest.)

A 20 bps jump in the qualifying rate means a household at the edge of affordability would need ~$1,100 more income to get a variable-rate mortgage on a $300,000 house with 5% down.*

Looking back to May 1, 2013 is more telling. Since then, a 5-year fixed mortgage payment on that same $300,000 house has risen about $120 a month to ~$1,475. That kind of payment change is a potential source of financial “difficulty” for less than 1 in 10 mortgage holders—if past CAAMP surveys are a guide. Note that “difficulty” does not imply default.

Naturally, all these incremental rate hikes can add up and decelerate home sales. But based on past consumer surveys, it could take a good point and a half rate-bump to curtail buying decisions in meaningful ways. At the moment, we’re only halfway there.

* Note: The benchmark rate has little effect on someone choosing a fixed term of five years or more. That person’s ability to qualify is instead dependent on the actual rate they pay (a.k.a.  the “contract rate”).

Rob McLister, CMT